This is not investment advice. The author has no position in any of the stocks mentioned. Wccftech.com has a disclosure and ethics policy.
Many expected Elon Musk to sell Tesla shares in the run-up to his Twitter takeover so as to fill a probable financing deficit. However, that somewhat dreaded liquidation took place in early November.
To wit, Elon Musk has now filed three separate Form 4s with the SEC, indicating that he sold Tesla shares on the 04th, the 07th, and the 08th of November (you can peruse these filings here, here, and here). Cumulatively, Musk has sold 19.5 million Tesla shares that are worth $3.9 billion over the past few days.
There has been growing chatter that Elon Musk might have to sell additional Tesla shares to finance Twitter’s growing cash burn, especially as some advertisers have suspended their ad-based spending on the social media platform as they assess the global town square’s direction under Musk.
@elonmusk sold nearly 20M $TSLA shares for $3.9B on Fri/Mon/Tues. IMO, he likely needs the funds to pay back any bridge loan he needed to close the deal. Since we know he raised 3P equity as well, it’s possible he’s done selling. I doubt he’s selling to finance TWTR’s cash burn.
— Gary Black (@garyblack00) November 9, 2022
However, The Future Fund’s Gary Black believes that Elon Musk’s recent Tesla stock liquidation spree is likely intended to pay off the bridge loans that the CEO of Tesla acquired in the run-up to the Twitter deal closure.
2/ I never bought into the argument of many bulls that Elon promised he was done selling in August. We estimated he needed to sell $5.4B $TSLA to close the deal. Over the past three days TSLA -13% vs NDX +2%. pic.twitter.com/tw4sjcWAGz
— Gary Black (@garyblack00) November 9, 2022
Of course, the dramatic underperformance of Tesla shares in recent days was a clear-cut sign that Elon Musk was likely selling a portion of his stake in the EV giant.
Elon Musk tweeted last week that Twitter was losing around $4 million per day, largely as a result of advertisers pausing their spending on the platform. To combat this financial malaise, Twitter has laid off around half of its workforce. Musk has also launched an $8 per month Twitter Blue service that will offer priority when it comes to “replies, mentions & search,” which, according to Elon Musk, will effectively counter the issue of spam accounts and bots. Readers should note that the Twitter Blue service has been separated from the platform’s account verification service, with the latter denoted by an “official” label underneath the account name. Presumably, the verified “official” label cannot be purchased.
3/ As of 6/30, $TWTR had $6.1B cash. YTD thru 6/30, TWTR generated $2.2B in adv revs and $0.2M in subs fees. TWTR had Costs & OpEx of $2.8M, and EBITDA of -$140M. Assuming TWTR can offset loss in Adv revs with $400M cost cuts and new $8/mo blue check fees, TWTR doesn’t need cash.
— Gary Black (@garyblack00) November 9, 2022
Gary Black believes that Twitter can offset the loss in advertising revenues by generating $400 million in annual cost savings via mass layoffs, with the slack picked up by the $8 per month Blue service. Consequently, Black does not believe that the latest Tesla stock liquidation spree by Elon Musk was intended to plow additional cash into the embattled social media platform.
